At the same time, pressure is rising on independent physicians groups as deeper-pocketed hospital chains, health insurers and national retailers elbow into their business. To compete in the consolidating market, DuPage Medical will need to invest heavily in new technology and specialized medical care, and forge partnerships with health systems or insurance companies to ensure favorable pricing for their services.
The intensifying competition and investment needs come at a tough time for doctors. COVID-19 has driven down patient volumes while driving up operating costs and demand for virtual care.
Thanks to a $1 billion investment from Los Angeles-based Ares Management in 2017, DuPage Medical likely doesn't need to find a buyer in the short term. But private-equity firms expect to cash out eventually, often through buyouts.
"We are strong believers in DMG's long-term goal to transform healthcare through an integrated outpatient delivery model that is patient-centered and physician-led," Bennett Rosenthal, Ares co-founder and a director of Ares Management Corporation, says in a statement. "Ares is committed to supporting DMG, its physicians and senior leadership in delivering on this vision and is not exploring a sale of the business."
In an interview, DuPage Medical CEO Steve Nelson doesn't directly answer when asked if the organization is considering a sale, saying that it and Ares aim to "continue to add capabilities and grow DuPage Medical Group to provide better access to the best healthcare in the world." He acknowledges that "we'll always be looking for strategic partners and capital investors who share that passion and mission."
Still, Nelson insists, "I'm not focused on a transaction at all. I'm focused on transforming heath care."
Nelson, 62, previously led United Healthcare, the health insurance business of Minnesota-based UnitedHealth Group, which has been acquiring doctors offices for years. He retired in 2019 but came out of retirement last July to take the top job at DuPage Medical, which had been operating with an interim CEO since Michael Kasper's death in May 2019. Nelson bunks in Streeterville while keeping the Minneapolis home he shares with his wife.
Although 2020 has been a hard year, Nelson says patient volumes have returned to pre-COVID levels. He won't discuss profitability but says the organization is positioned well thanks to its strong balance sheet and reserves, as well as its agility.
Nelson arrived at DuPage as traditional market boundaries in health care were collapsing. Walgreens in July unveiled plans to put VillageMD clinics staffed by physicians in 500 to 700 of its drugstores over five years. CVS Health plans to launch 1,500 HealthHUBs by the end of 2021, and Walmart recently expanded its health offerings to include dental care and counseling. Meanwhile, insurers like Humana and UnitedHealth continue scooping up physicians groups.
DuPage appears to fit the acquisition profile of Nelson's former employer, Bielamowicz says.
"United has a history of looking for anchored groups in markets they want to move into, and Chicago is a market that's ripe for not just disruption on the provider side but also disruption on the insurance side with a very dominant Blues plan," Bielamowicz says. "You have to imagine a group like DuPage is at or near the top of its list."
Bielamowicz sees a parallel to United's strategy in Massachusetts, another Blue-dominated market. The insurer's OptumCare unit in 2018 acquired Worcester, Mass.-based Reliant Medical Group, which has about 500 providers, for $28 million.
Though Nelson shies away from buyout talk, he acknowledges discussions with insurers about potential partnerships. UnitedHealth, he says is "very interested in growing in Chicago. I was interested in growing in Chicago when I was there. Humana, Aetna, Cigna, they're all very interested, and we represent an opportunity for them to grow if we work with them in the right way. So we're having conversations with all those folks trying to figure out, what's the right way to be deliberate, strategic for the purposes of transforming health care and bringing value to the marketplace and to the patients that we serve."
In a statement, Cigna calls DuPage Medical a "valued provider network partner," noting, "We regard the primary and specialty care clinician as critical to affordable, predictable and simple delivery of care and strongly support the role of the independent clinical organization."
UnitedHealth Group and Aetna decline to comment, and Humana did not respond to a request for comment.
As DuPage mulls potential relationships with insurers, its own acquisition campaign has more room to run. The group offers doctors an opportunity to remain independent but also take advantage of the reimbursement rates, technology and data capabilities of a larger organization. Nelson says growth outside of Illinois is "certainly on the table," noting that the group is doubling its capital investment agenda in 2021 with a focus on technology and virtual care capabilities.
Out-of-state acquisitions can be tricky, Bielamowicz warns. "It's not easy to go into other markets and replicate the culture and the practice model that you've built over many years in your hometown," she says, but acknowledges that "as we emerge on the other side (of the pandemic) in 2021, there's likely to be a lot of doctors across the country looking for partners."
